Strategic Research on ZipCar

Categories: Business Investment Marketing

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1. Evaluate this potential venture and the progress that Chase has made.

The potential of Zipcar exceeded the expectations of the owners Chase and Danielson in many factors. Their goal of creating this urban-style car borrowing system gave new light to the ideas of what options urban populations see in commute. The initial idea needed to be sized properly and growth was a big factor in terms of how fast they could get their cars on the road. With every bump and hurdle, the owners faced new issues of assumption miscalculations and investment needs.

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However, the success of their pivoting methods gave hope to the success of the business. The progress that Chase made in developing this new venture provided a new method of transportation at a easier cost to the consumer (over annual periods). Overall, the business shows great potential to be a standout service in large urban areas.

2. What is the business model, and how has it changed between December 1999 and May 2000? What does the data from actual operations in September say about how the business model is playing out in practice? Does this data give you comfort or concern?

The first business model focused on a large annual fee, $300, and small expenses for per mile and per hour calculations (.40 cents per mile and .50 per hour).

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The focus of these numbers was based off different pricing structures and cost assumptions. Users would be able to set blocks of time to use the cars and the software would calculate the billing towards each customer.

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These assumptions turned out to be inaccurate and Chase was forced to restructure her business model. She decided to lower the annual cost, which according to her data was the main factor in deterring customers from using the service. The annual cost was dropped to $70, but the charge per hour and mile was increased to allow costs for cars to be covered. The data showed much improvement after these recalculations and caused more consumers to accept the idea of the service and therefore increased sales. The action Chase took did give comfort, as her improvement in the business model provided a new method of marketing to low income residents and more effective pricing strategies.

3. What actions should Chase take as a result of the September operating results?

The actions Chase should take as a result of the September operating results are to change the budget in terms of what investment needs to be focused on the most. Variable costs, such as leasing per vehicle and parking costs, played the largest role for expenditures. These costs were constantly increasing and therefore required immediate attention. However, Chase was surprised in the results for marketing with costs as low as $1500 per month spent in that category. This data would be useful in helping to ease investor mindset of marketing difficulties within urban communities. The cars themselves would actually serve as mobile marketing methods to spread by word of mouth. Therefore, the actions Chase should take are to focus on gaining investment to fund the increasing variable and fixed costs within her business model and providing data of improvement from the change in annual prices and variable prices for consumers. This would allow for her to promote upon the idea that with this much needed investment she would gain marketing and consumers on the same purchase of new cars.

4. What is the strongest argument Chase could make to a potential investor about the attractiveness of the venture? What, specifically, should her elevator pitch be at the Springboard forum?

The strongest argument that Chase could make for investors is the success of the new and improved business model. Her focus should be to emphases on the increasing variable costs but decreasing marketing needs. Investors would see their investments acting in two separate categories with simple purposes; purchasing more cars, parking spots, and costs associated with overhead ($44,000 per month). This would provide her a simple method in what expenditures the investments would provide and how improvement in these areas would create profit for the potential investors. For her elevator pitch: “Hi my name is Robin Chase and my business, Zipcar, provides the urban dweller with a reliable, easy-to-use car service. Our goal is to create a more reliable commuting service that focuses on the ease of transportation for simple tasks, such as getting groceries or running errands in a large city. One may ask, what differentiates your service from that of a taxi or private transpiration service? Our answer is that we focus on the average citizen who wishes to avoid the hassle of major taxi and car pick-up service and instead offers the freedom of using a reliable vehicle for your own needs without outrageous costs. With Zipcar, you will be free to transport yourself to any area on your own schedule. The potential of this venture can offer outstanding profits to investors due to its nature of consumer pricing ease and cheap marketing methods. Zipcar is the revolutionary idea of what a car service should be, of what the consumer needs.”